Retirement Spending Is Not a Straight Line

[Onward]

Some interesting thoughts on spending levels through retirement.

Personally I'm uncomfortable planning to spend less at any point in my retirement, including extreme old age.

The grim Morningstar study mentioned in the last paragraph--does anyone know more about it?

Retirement Spending Is Not a Straight Line - AMAC, Inc.

 

[Katsmeow]

First, let me say that I recognize that if someone needs long term care for an extended period of time then spending can go up even in very old age.

That said - leaving that aside - the evidence seems clear that most people do reduce spending as they get older and from what I have seen from family and friends it usually isn't because they've run out of money. The reality is that for most people as they get much older health reasons often slow them down. Even for the healthy very aged population, there is more fatigue and less desire to go out and about and spend money. There is less desire to try new things, just not wanting to spend the energy on it.

I sometimes have the feeling that for some on this forum, they really don't want to admit that. They aren't going to slow down in their 80s. No, they are going to be raring to go on round the world trips. So they don't need to consider the fact that spending desires will change in later change. They also need to plan for their portfolio to last until 100 because - unlike almost everyone else - they are going to be alive and healthy at 100.

The rationalization for this is often prudence (I want to be prepared in case I want to go around the world at 95. I want to be prepared in case I live to 100.), but I also think that for many this really is a rationalization that is used instead of thinking about the reality that most people post-80 certainly do slow down and spend less (and precious few live past 90).

 

[NW-Bound]

People often comment about seeing geezers in airports going places. But I have spent a lot of time visiting my late father and father-in-law in hospitals, convalescent homes, and nursing homes to know there are a lot more people in those places. And many were a lot younger than 80. And many bed-ridden patients did not last very long in the nursing homes either.

 

[Focus]

I sometimes have the feeling that for some on this forum, they really don't want to admit that. They aren't going to slow down in their 80s. No, they are going to be raring to go on round the world trips. So they don't need to consider the fact that spending desires will change in later change. They also need to plan for their portfolio to last until 100 because - unlike almost everyone else - they are going to be alive and healthy at 100.

The rationalization for this is often prudence (I want to be prepared in case I want to go around the world at 95. I want to be prepared in case I live to 100.), but I also think that for many this really is a rationalization that is used instead of thinking about the reality that most people post-80 certainly do slow down and spend less (and precious few live past 90).

I agree with much of what you say.

It appears that usually spending decreases later in life (as travel and other discretionary spending drops) -- until the final years, when care-related expenses throw everything out of whack. Hard to plan for that.

There's way too much wishful thinking concerning healthy, longer lifespans. I initiated a thread about this a couple of years ago: http://www.early-retirement.org/forums/f38/never-say-die-54763.html

 

[haha]

People often comment about seeing geezers in airports going places. But I have spent a lot of time visiting my late father and father-in-law in hospitals, convalescent homes, and nursing homes to know there are a lot more people in those places. And many were a lot younger than 80. And many bed-ridden patients did not last very long in the nursing homes either.

Of course you see mostly old, sick people in nursing homes. I see old people, especially old gals, likely at least mid 80s (though I di d not attempt to confirm this) on planes and in the train coming from the airport and on buses towing their luggage on to home.

I don't know, but my guess is that if they have the means, there are more octogenarians on golf courses than in nursing homes.

Ha

 

[NW-Bound]

But yes, of course. We go to sick places, we see sick people. We go to happy places, we see healthy people. The question is who outnumbers whom. I might be biased by the sad things I see, but statistics show that most people do not live that long, or stay that healthy.

Another thing I observed in nursing homes. My father-in-law lasted 3 years in the nursing home, and outlived many of his roommates. Until his death, he was visited daily and patiently spoonfed by my wife and her siblings. Left alone, he would have been fed via a tube because he had problem swallowing. I suspect many of his roommates did not last as long because they were heartbroken and lonely. Compassion given by the non-relative care takers only goes so far.

Talk about means, all my parents and parents in law slowed down in their late 70s, and money was not the problem. We would invite them on a trip and offer to pay for it, and they declined. My father-in-law was in relatively good shape until his mid-80s, then he started to go downhill fairly fast. Again, if it weren't for the devotion by his offsprings, he would not last 3 years in the nursing home.

 

[haha]

But yes, of course. We go to sick places, we see sick people. We go to happy places, we see healthy people. The question is who outnumbers whom. I might be biased by the sad things I see, but statistics show that most people do not live that long, or stay that healthy.

First, congratulations on being such responsible and loving offspring.
One small comment- once you are dead, no problem. You aren't traveling or suffering in a nursing home. You are certainly correct that most people do not live past the mid 80s. Poorer, less educated and male people go soonest, followed by wealthier better educated and female people. So if you define the class of "people" as all those born in a given age cohort, you are 100% safe that most will be dead or sick by some early 80s age. In fact, most will be dead, let alone sick.

Ha

 

[Mulligan]

First, congratulations on being such responsible and loving offspring.
One small comment- once you are dead, no problem. You aren't traveling or suffering in a nursing home.

Ha

I would guess there are more of those than either traveling or in a nursing home.

 

[NW-Bound]

While my father-in-law died at 93, my own father died at 75 due to complications from total kidney failure.

My father's will to live was so strong that he survived beyond what all doctors and nurses expected. It was his choice and we supported him as much as we could, but I personally would not last that long in that miserable state. Already a gloomy person, I have been thinking about that end phase of life more than most people because of that experience.

 

[ERD50]

...
It appears that usually spending decreases later in life (as travel and other discretionary spending drops) -- until the final years, when care-related expenses throw everything out of whack. Hard to plan for that. ...

With that mindset, someone in their 30's would never put away anything for retirement. Everything could go out of whack, it's 'hard to plan for that'.

But of course, anyone who started to put money away in their 30's is in better shape than if they didn't. And if I live long, and if I have some large expenses in my old age, I'd like to be in a better position to cover those expenses.

Sure, travel and other discretionary expenses will likely decrease, but we can't know about other expenses. Maybe an extra $20,000/year would buy a lot of comfort/care for us - who knows?

What's your plan B? Be a burden on family? Hope the state will take decent care of you?

-ERD50

 

[Focus]

You misunderstood me. I didn't say, "It's hard, so just put it out of your mind and do nothing about it." I was simply acknowledging that the extent to which one will have to save for care in final years is unknown and hard to quantify, and the amount needed might surpass any savings from spending decreases in other areas as one ages. Those spending decreases will likely be in effect for more years, while the care-related expenses will be higher and for a shorter period. All these variables make it difficult to plan. That's all.

In my case, I've been paying LTC insurance for a while. Not sure if that's going to turn out to be the right decision -- it's hotly debated, as you know -- but that's my Plan A.

 

[Alan]

Of course you see mostly old, sick people in nursing homes. I see old people, especially old gals, likely at least mid 80s (though I di d not attempt to confirm this) on planes and in the train coming from the airport and on buses towing their luggage on to home.

I don't know, but my guess is that if they have the means, there are more octogenarians on golf courses than in nursing homes.

Ha

We saw lots of folks in their 80's on our crossing on the Queen Elizabeth in April, and chatted with a great couple in their 90's who travel regularly from England to New Zealand to visit relatives via plane, but decided that the air trip was too tough these days so they had taken a world cruise, got off at Auckland, got back on a few days later in Wellington.

A few weeks ago we visited with a 93 year old uncle of DW who still goes on regular long weekend vacations mainly to meet new folks, different from the members of his dance club. (his wife died 3 years ago)

While I accept that spending probably will decline as we age I'd rather plan to have the money available to continue to go cruising, sky diving or whatever

 

[Amethyst]

To put it another way, once you age out of the "people treat you nicely because you're cute" stage, you are well-advised to transition into the "people treat you nicely because you appear to be well-heeled" stage. And that takes money.

Amethyst

 

[NW-Bound]

As I don't care for even larger homes, nor fast fancy cars, nor expensive toys like boats and planes, I do not need to spend a lot more money. Both my wife and I love to travel, and that's our largest discretionary spending.

In about 2005 to 2007, my wife already retired, I was working part-time (20 hrs/wk) and on/off at that, our children were already young adult or late-teen to take care of themselves, my father-in-law was not sick to require daily visit, we were traveling like mad. Between times spent in our 2nd home to set things up, we took two foreign trips and two domestic trips a year. Money was no problem then, as the market was going great. So, I told my wife that should be our plan: 4 trips/year. As I really did not care to spend time on long flights, I needed a breather of a few months between trips.

Then, both my children were in college (higher expenses) and my father-in-law needed daily visits from my wife, our travels tapered off. Now, we are free again, and my stash is even larger. I need to recover my health, and see if we can resume the original plan. Forget about the money; if I still have the desire to travel, then it means my health is holding up, and that by itself is great.

When people have their health, all they think about is money. But money alone does not get one going, you see.

 

[timo2]

Maybe the reason people mentioned in this article that are in their 80's are spending less is that they have less money to spend?

 

[NW-Bound]

At 3.5% WR, if my stash does not grow, I hope it will at least stay the same 20 years from now. And I already anticipate spending less 10 to 20 years from now, if I last that long. Travel will be less fun when your body aches. Watching National Geographic on TV may be enough, even if I still have any interest. And I will not be able to take care of two homes, nor driving my motor home, etc...

Globe-trotting octogenarians, more power to them, but it is not likely I will be able to join them. And if I envy them, it's for their health, and not their damn travel. And that's that.

So, why don't I spend more now? One can only enjoy travel so much until it's like work. And there's a certain pleasure in keeping your stash, managing it and watching it grow. Some posters here have made the same comments. If you don't understand, it's OK. People are different.

To put it another way, once you age out of the "people treat you nicely because you're cute" stage, you are well-advised to transition into the "people treat you nicely because you appear to be well-heeled" stage. And that takes money.

Amethyst

And that may take a lot more money than I ever have. It may take as much as what Howard Marshall spent on his nurse, Anna Nicole Smith.

 

[Katsmeow]

Maybe the reason people mentioned in this article that are in their 80's are spending less is that they have less money to spend?

I don't think that research has shown that the only or even primary reason that spending decreases in later years is because of lack of money.

I have also seen what has occurred in my own relatives and DH's relatives as well as friends. It is overwhelmingly not lack of money that slows people down. It is lack of good health and lack of desire for an active lifestyle.

Recently my uncle died in his mid-90s. He was actually pretty healthy, still living on his own and still driving almost to the very end (he went downhill very fast). Yet, his desire for a lot of activity just wasn't there even though he was in good health living independently.

My own mother is almost 90. She also lives independently with a lot of health problems (all physical, not mental). She tires easily. So, she doesn't like to go out a lot. When she was in her mid-70s she went on vacation with us (at our expense). We've offered to take her since then but she finds it too tiring. She does spend more on some things - she hires someone to clean her house and do yard work that once she would have done. But that is a drop in the bucket compared to all the other things she doesn't spend.

I could give example after example but I have repeatedly seen it that the person over 80 who is still living independently spends less than was spent earlier. I have no issue with someone who wants to prepare for the possibility of being a globe trotter at 95. However, I don't think it is feckless to choose to plan for the higher likelihood that one's spending may decrease in later years.

 

[OAG]

Dad, Granddad, and Greatgranddad all died at barely age 60. At 73 I feel every new day is a gift. I spend more every year and with 10 grand kids with great grand kids arriving annually recently I don't plan to curb spending any time soon.

 

[MichaelB]

The morningstar article referenced in the first post http://corporate.morningstar.com/ib...searchPapers/LowBondYieldsWithdrawalRates.pdf

A snippet from the executive summary

We find a retiree who wants a 90% probability of achieving a retirement income goal with a 30-year time horizon and a 40% equity portfolio would only have an initial withdrawal rate of 2.8%. Such a low withdrawal rate would require 42.9% more savings if the retiree wanted to pull the same dollar value out of the portfolio annually as he or she would get with a 4% withdrawal rate from a smaller portfolio.

 

[Lsbcal]

To put it another way, once you age out of the "people treat you nicely because you're cute" stage, you are well-advised to transition into the "people treat you nicely because you appear to be well-heeled" stage. And that takes money.

Amethyst

Interesting comment. I don't think anyone ever thought I was all that cute (handsome) and I definitely (maybe? ) have passed that stage. So that leaves the "well-heeled" stage. So what do I have to do to get to that level? Do I really want that? What about the real me? Too many questions.

This deserves a new thread in itself. So I started it here:
http://www.early-retirement.org/for...o-to-be-treated-nicely-67880.html#post1347216

 

[growing_older]

Despite all the studies done, my own personal spending in old age may not conform to averages, so I'm not going to plan so that my spending is not constrained by this pattern. I would like to allow for the possibility of travel (perhaps even more expensive pampered travel) if I feel up to it. Likewise, I expect my spending on household help, lawn service, car service, clever new things or medical advances not yet invented and so on will rise as I get very old, assuming I can stay out of nursing care. If not, then I will want to have enough to afford really good nursing care.

I am not planning on decreasing spending. If I find I do not spend as much as I allowed for, then I can increase my charitable giving. I really do not want to be caught short because I made some assumptions about spending that turned out to be untrue, or only apply in general, but mot to me in specific. Just like I do not plan to run out of money once I reach my forecast life expectancy, I do not want to be limited by over-optimizing my plans.

 

[brett]

We are spending considerably less on housing and more on travel.

We did not downsize to save money but we certainly notice the difference in what we now spend. And we are much happier with a downsized lifestyle. Next to go will be one of the automobiles. Again, not to save money but to get rid of something that we don't need and has become a millstone.

We anticipate spending much more on travel- for the next ten years at least until we hit 70...and hopefully for another 10 years if we remain healthy. This will probably involve storing everything and going to live overseas for a year at some point.

We have more than we need and more than we anticipated to have. Our thoughts now turn to what we can do for our children some distant point on the horizon. Their chances of having the same income levels and the same retirement nest egg are certainly not as great as ours were. In the meantime they have to learn to struggle financially, budget accordingly, and build lives for themselves.

 

[Onward]

The morningstar article referenced in the first post http://corporate.morningstar.com/ib...searchPapers/LowBondYieldsWithdrawalRates.pdf

Thanks.

 

[NW-Bound]

2.8% WR?

I'd better go find out what our SS will be, and put that into my plan.

 

[Badger]

Another thing I observed in nursing homes. My father-in-law lasted 3 years in the nursing home, and outlived many of his roommates. Until his death, he was visited daily and patiently spoonfed by my wife and her siblings. Left alone, he would have been fed via a tube because he had problem swallowing. I suspect many of his roommates did not last as long because they were heartbroken and lonely. Compassion given by the non-relative care takers only goes so far.

If only more people would understand this. One of my biggest fears of getting older is having to rely on non-relatives because there is no one else. Although, I have the greatest respect and admiration for those caregivers who are truely devoted to helping the aged with compassion and attention. At the same time I wouldn't want to be a burdon on any family member that would prevent them from living their own life as they deserve. I would rather walk off into the forest like an old Indian. That or just ride off into the sunset on an Indian motorcycle.

Cheers!

Cheers!